Stocks sink as traders cash in winnings after week's gains

NEW YORK -- Stocks slid Thursday following a surge earlier in the week and as traders braced for a release of the government report cards on the nation's biggest banks and for the April jobs report on Friday.

Major market indicators dropped more than 1%, including the Dow Jones industrial average, which lost 102 points after gaining nearly the same amount Wednesday.

Stocks fell almost from the start as investors looked past upbeat reports on the job market and retail sales and decided to cut their holdings following what had been a 4.8% gain this week in the Standard & Poor's 500 index.

"With the rise we've seen lately there's no sense leaving it all on the table," said Dan Cook, senior market analyst at IG Markets.

The market seems to already be expecting positive news on the economy is now looking for the next catalyst to take stocks higher after a surge of more than 30% from 12-year lows in early March.

"This is a market that is starting to bake in a lot of positive surprises," said Craig Peckham, a market strategist at Jefferies & Co.

The Dow fell 102.43, or 1.2%, to 8,409.85 a day after the blue chips jumped 102 points to close above the 8,500 level for the first time in four months. The index is down 4.2% for the year.

The S&P 500 index fell 12.14, or 1.3%, to 907.39, and the Nasdaq composite index fell 42.86, or 2.4%, to 1,716.24.

Investors pocketed gains ahead of the release of the government's stress tests on banks, which largely met with investors' expectations following news reports this week on which financial companies would be asked to raise money to safeguard against a weakening of the economy.

Stock futures turned higher late Thursday after the government released the results and said 10 of the nation's 19 largest banks need a total of about $75 billion in new capital to withstand losses if the recession worsened.

Financial stocks sold off in afternoon trading after weak demand at a Treasury bond auction raised concerns among investors about the government's ability to raise funds to fight the recession.